Public disclosure bar does not apply where relator materially adds to the prior allegations

A qui tam relator was not barred by the public disclosure bar because the information she provided materially added to the prior public disclosures, a federal district court in Pennsylvania has ruled. Notwithstanding the existence of the public disclosures and their substantial similarity to relator’s allegations, she provided the government with extensive details of Medtronic’s alleged fraudulent scheme which significantly added to the essential factual background possessed by the government from prior cases. Consequently, she was deemed to be an original source as to her barred allegations of fraud and these claims survived dismissal under the public disclosure bar. (U.S. ex rel. Forney v. Medtronic, Inc., June 4, 2018, Smith, E.).

Bases of fraud allegations. The relator worked at Medtronic, Inc. (Medtronic) for 16 years until 2012 when she was terminated. In November 2015, she filed a sealed complaint alleging that Medtronic violated the federal False Claims Act (FCA) by providing free services to people who made purchasing decisions about Medtronic devices, and that the free services were intended to persuade health care providers to purchase Medtronic devices. Her amended complaint alleged two categories of illegal practices: (1) device checks and device interrogations on pacemakers for which she was personally trained and credentialed; and (2) practice management consulting whereby providers were counseled on how to code their billing to maximize reimbursements.

Medtronic contended that all of those allegations were the subject of prior FCA claims and were therefore barred by the public disclosure bar. The court considered the application of the bar to the present case and denied Medtronic’s motion to dismiss.

Valid prior public disclosures. Medtronic contended that five federal qui tam cases qualified as valid prior public disclosures, and the court found that two of the five potential prior public disclosures in fact satisfied the public disclosure standard; however, the other three qui tam cases did not qualify as valid prior public disclosures because the government declined to intervene in those cases. The court then turned to the issue of whether the two valid prior public disclosures served as a bar to the relator’s claims.

Information materially added to prior disclosures. The public disclosure bar would require dismissal of the relator’s claims unless she were deemed to be the original source of the information. She could qualify as an original source either by (1) being the individual who prior to a public disclosure voluntarily disclosed to the government the information on which allegations or transactions in a claim were based; or (2) having knowledge that was independent of and materially added to the publicly disclosed allegations or transactions.

The court considered the totality of the evidence that the relator provided regarding her reimbursement guidance and administrative work, and found that she qualified as an original source: her vast supply of names, places, times, and strategies significantly added to the essential factual background possessed by the government from the two prior cases. Notwithstanding the existence of the prior public disclosures and their substantial similarity to the relator’s allegations, she provided the government with extensive details of Medtronic’s alleged fraudulent scheme which significantly added to the essential factual background possessed by the government. Consequently, she was an original source as to her barred allegations of fraud and her claims survived dismissal under the public disclosure bar. Accordingly, the court denied Medtronic’s motion to dismiss.

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